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Despite its proximity and popularity, industry watchers say Mexico could face competition from South American countries as U.S. companies look for offshore alternatives to India.

U.S. companies considering nearshore providers in Central and South American for contact center locations might be wary of Mexico, despite its popularity and close proximity to North America, industry watchers say.

Mexico represents a prime destination for U.S. companies to locate contact centers and not only because of geography. About two-thirds of the U.S. Hispanic population traces their ancestry back to Mexico, which enables cultural similarities between the caller and the contact center agent, according to Peter Ryan, head of contact center outsourcing analysis with Datamonitor. Ryan, who Tuesday is presenting his findings to the IP & Contact Forum International Congress in Mexico City, says Mexico faces competition from newer offshore alternatives in Argentina, Colombia, Chile, Costa Rica and Panama as customer demand for bilingual contact centers grows.

"There is no mistaking the need for contact center agents that are fluent in both Spanish and English," Ryan stated in a Datamonitor release. "Not only is the U.S. Hispanic market growing in sheer size, but its level of household income is also increasing at a rapid rate. The capacity to service end-users in their mother tongue has gone from a luxury to a necessity, and leveraging Latin America in this regard has become a priority for contact center executives. The question is whether Mexico is able to handle this level of demand over the long term, or will it filter into other parts of the region."

American companies looking to serve a growing Hispanic market would welcome the chance to expose more customers to U.S. products and services through nearshoring or onshoring contracts in Mexico. And while Mexico offers U.S. companies an "exceptional level of linguistic familiarity between contact center agents and end users," the country suffers from a perception that it is unsafe to travel and do business there, Ryan said.

Other inhibitors to sending jobs immediately south of the border include concern over Mexico's cities. Ryan points out in his research that it is questionable if Mexico's cities are "adequately networked for large-scale contact center work." With more countries making themselves available for contact center work, Mexico will have to prove it has the infrastructure to sustain the potential growth of offshoring contracts within its cities.

Another alternative to offshoring contact centers agents are home-based agents working in virtual call centers. Companies such as Alpine Access, West Corporation and Working Solutions establish the virtual center and contract agents that work from their homes. According to Ryan, home agents represent the "fastest growing contact center market in the U.S." and U.S. companies might find that contracting with "onshore agents at a reduced rate … a more compelling argument than offshoring contact center services."

And lastly Mexico, like other locations, will face a growing anti-offshoring sentiment going forward.

"To many consumers, outsourcing work abroad remains distasteful," Ryan explained in his presentation. "This feeling has also been championed by many media outlets and politicians."